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A Megaload of Unintended Consequences

By Bill Wilson–After an outpouring of opposition by millions of Internet users and tens of thousands of websites against the “Stop Online Piracy Act” (SOPA) and the “Protect Intellectual Property Act” (PIPA) in the House and Senate, congressional proponents of the bills have delayed votes on Capitol Hill.

That is not stopping the Obama Administration, however, which has been acting as if the proposals have already been passed. The most recent example is the shutdown of Megaupload.com, a web-based data storage company that boasted over 150 million users, by the Justice Department and New Zealand law enforcement officials.

According to the indictment, the company was accused of facilitating the distribution of pirated movies, television shows, music, and other copyrighted material. Allegedly, the company refused to process Digital Millennium Copyright Act takedown requests, and falsely told copyright owners materials had been removed when members of the company took steps to keep the pirated material on their servers.

Finally, according to the indictment, the company allegedly “made payments to uploaders who were known to have uploaded infringing copies of copyrighted works” and that members of the company itself were uploading infringing works.

If true, the members of the company would certainly be in a lot of trouble. However, this case has broader implications that should be considered.

Over 150 million users worldwide — millions of whom were premium subscribers — have lost access to their data files. By some estimates, there were over 8 billion files stored on Megaupload, just a fraction of which contained infringing material according to the indictment, which only claims that “many millions” of the files are infringing. Like many alleged criminal enterprises, Megaupload carried on several legitimate business dealings.

So, whether the company is guilty or not, Megaupload had millions of users who were using its servers for legitimate purposes — and they’ve just had their data seized without cause.

This, in turn, sets up a series of dangerous precedents.

The future of information technology is in cloud-based applications. When the feds can seize the entire cloud based on the actions a few or even many participants, it violates the property rights of its legitimate users.

The Justice Department has responded to media inquiries about the status of the legitimate files that were stored at Megaupload, saying that users had no reasonable expectation of long-term data storage from the company: “the vast majority of Megaupload.com users do not have significant capabilities to store private content long-term since anything that isn’t repeatedly downloaded is automatically deleted from the system.”

However, premium users had an expectation that their data would be stored for a period lasting at least 90 days or forever if it was regularly accessed. Now, it looks like everything on the Megaupload servers could be deleted as soon as Feb. 2.

To draw a real world analogy, this would be like a bank being accused of violating some law, and so all of the innocent depositors’ assets were also seized. Or if a mobster owned an apartment building and was arrested, all of the building’s blameless occupants were exiled and their property taken into custody, based merely on criminal activity taking place in one of the apartment units.

Even more alarming is the Obama Administration’s expansion of executive powers to police the Internet in this manner, based on a reading of existing federal forfeiture laws in a manner that was never necessarily intended.

Already, the Department of Homeland Security (DHS) has used this basis to seize domains in error, including the cases of mooo.com and dajaz1.com, only to be returned weeks and months later respectively without any compensation for loss of revenues or even a good explanation for the mishaps.

Overall, the Obama Administration’s actions to date with Megaupload.com, mooo.com and dajaz1.com raise significant due process, First Amendment, and property rights concerns. The world has witnessed attempts by governments to shut down political speech using the same rationale and technologies that the Departments of Justice and Homeland Security have employed already.

Congress needs to act now to tie their hands while the courts move to rein in this aggressive, arrogant overreach by an out-of-control government.